Compliance in the UKDavid Stallibrass

Shanghai | December 2012

Personal views of author. Does not represent opinion or position of any institutions to which he is affiliated.

Three pillars of compliance

OFT 1391: The impact of competition interventions on compliance and deterrence

Deterrence is key to effective compliance

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Never started because of fear of enforcement

Stopped through enforcement

Deterrence is key to effective compliance

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OFT 1391: The impact of competition interventions on compliance and deterrence

Deterrence is key to effective compliance

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Less clarity and enforcement

Often not even considered!

OFT 1391: The impact of competition interventions on compliance and deterrence

The agencies’ responsibility

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A note on “private enforcement of public law”

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Limited private enforcement in UK and EU

Strong private enforcement in US

Judges rule on whether a contract or action is legal based on whether it is compatible with the objectives of the law Not on the extent to which it harmed the

plaintiff

Private enforcement can support the role of competition agencies

Compliance in the UK: lack of knowledge

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Firms think knowledge of

competition law is important, but don’t really know what the

law is!

OFT 1391: The impact of competition interventions on compliance and deterrence

Compliance in the UK: all sanctions relevant

OFT 1391: The impact of competition interventions on compliance and deterrence

Compliance in the UK: all sanctions relevant

Though damage is often done by the

investigation, not the finding of guilt

OFT 1391: The impact of competition interventions on compliance and deterrence

Compliance in the UK: all sanctions relevant

Though much lower than likely benefits of

collusion

OFT 1391: The impact of competition interventions on compliance and deterrence

Compliance in the UK: all sanctions relevant

Probably considered more important by

small businesses than large ones

OFT 1391: The impact of competition interventions on compliance and deterrence

A note on penalties

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Substantial increase in likely fines (though still capped at

maximum 10% of global firm

turnover)

Though still less than likely

overcharge!

And chance of capture is <100% so if fines are the only

sanction, it’s profitable to break the law!

Connor (2006). Connor and Lande (2007). OFT 423 guidance on appropriate penalty (2012).

Compliance in the UK: Individuals comply for different reasons

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In a behavioral experiment, different people reacted to different incentives

Some people care about expected returns Deter through high fines, effective enforcement

Some people care about personal risk Highlight risks, create individual sanctions

Some people want to do the right thing Educate industry, and the public

OFT 1391: The impact of competition interventions on compliance and deterrence

Compliance in the UK: Policy response

Continued high-profile enforcement Detailed decisions, strong media presence, high fines

Focus on individual incentives Director Disqualification and Criminal Sanctions

Guidance to company Directors

Increase transparency and guidance New competition law guidance

New guidance on compliance

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OFT 1330: Quick guide to competition law. OFT 1340: Company directors. OFT 1341: Achieving Compliance OFT 510 : Director

Disqualification.

Four step guidance to firm compliance

16OFT 1341: Achieving compliance

Four step guidance to firm compliance

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What competition compliance issues might your firm face? Dominant?

Involved in bidding?

Regular contact with competitors?

Joint ventures and partnerships?

Complex vertical contracts?

OFT 1341: Achieving compliance

Four step guidance to firm compliance

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Where is your risk highest? Which staff?

Which events?

Which contracts?

Which business practices?

Which relationships?

OFT 1341: Achieving compliance

Four step guidance to firm compliance

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Mitigate the risk External legal advice

Training

Compliance programs

SME awareness

Creating a compliant culture

OFT 1341: Achieving compliance

Four step guidance to firm compliance

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Review your effectiveness Has your mitigation been

successful?

Are there any new risks?

Have any old risks changes or decreased?

Is there a clear culture of compliance at all levels?

OFT 1341: Achieving compliance

Four step guidance to firm compliance

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Ensure a core commitment to compliance from the top down

Appoint a responsible director for compliance with competition law

OFT 1341: Achieving compliance

A note on fine reduction

The OFT will sometimes reduce a firms fine if it had a compliance program in place and shows good faith during the investigation

Other authorities think that “compliance is its own reward”

Compared to getting the big things right, it’s not very important

22OFT 423 guidance on appropriate penalty (2012).

Conclusion

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Resources

www.oft.gov.uk

http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/competition-law-compliance/

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